Category: Economy

City Council, Economy, Taxes

Proposals to Close City Deficit Prompt Immediate Backlash from Businesses, Business-Backed Council Members
A look at the ongoing structural shortfall in the city budget through 2026; “PET” refers to the JumpStart payroll tax.

By Erica C. Barnett

A list of potential progressive revenue options put forward by a city task force this week is already stirring controversy among businesses (and business-backed city council members) because it involves new taxes, rather than spending cuts, to maintain existing services and meet the city’s labor obligations. The policies, which are not recommendations, would help offset an average projected revenue shortfall, beginning in 2025, of $244 million a year.

Immediately after the task force published its list of options, one of the group’s own members, Seattle Metro Chamber CEO Rachel Smith, issued a statement denouncing the city for its “lack of budget transparency, accountability, and practical problem-solving” and arguing that the city’s real problem is overspending, not a lack of revenue.

Instead of proposing any new taxes, Smith said, Seattle should “look at reducing or eliminating services that do not meet measurable outcomes, are duplicative of other entities, are no longer aligned with current priorities, or have grown faster than real-world demands.” Smith did not identify any specific programs the Chamber believes the city should eliminate.

During a presentation of the recommendations to the council’s finance committee Thursday morning, Councilmember Alex Pedersen echoed Smith’s comments. “I believe City Hall doesn’t have a revenue problem. It has a spending problem,” he said. Chiming in, Councilmember Sara Nelson added that she believes the city should “live within our means” and cut the budget instead of raising taxes.

“I am simply suggesting that spending within our means is not austerity. It’s our responsibility,” Nelson said.

 

“The definition of austerity is a situation in which people’s living standards are reduced because of economic conditions,” Herbold responded.  

The projected shortfall, which is the result of declining revenues, expiring short-term funding, and spending increases, represents more than 15 percent of the city’s annual discretionary budget.

The progressive revenue work group, which included representatives from business and labor as well as the council and mayor’s office, came out of a statement of legislative intent the council passed in 2021, expressing the council’s commitment to work with the mayor to come up with permanent funding sources for a number of new general-fund programs that the city paid for using federal COVID relief dollars and revenues redirected from the JumpStart payroll tax.

With federal funding running out and JumpStart reverting to its intended purpose (funding housing, equitable development, and Green New Deal programs), the city is seeking new revenue sources to fund needs that are still ongoing, including homeless services, alternative 911 responders, and business assistance.

In addition to new programs, the city has had to spend more each year to keep up with population growth (more people require more services) and inflation, which raises labor costs. The city has also committed to raise wages for workers at human service nonprofits that contract with the city, which are so low that many employees qualify for public benefits. Overall, internal labor agreements account for 85 percent of the city’s increased costs through 2026, according to the work group’s report, while raises for human service workers account for about 4 percent of the increase.

According to a memo from the council’s central staff,  if the city fails to deal with this structural shortfall, the budget gap between 2025 and 2030 will average $244 million a year.

The task force, which looked only at the revenue side of the equation, whittled a list of more than 60 potential new fees and taxes down to nine, including three the city could implement right away, without the need for a ballot initiative or a change to state law. Those options include increases to the size or scope of the existing JumpStart payroll tax; a local tax on capital gains above a specific level, modeled after the state capital gains tax that recently withstood a state supreme court review; and a local tax on businesses whose CEOs make significantly more than the average worker.

Councilmembers have already proposed—and council staff have already analyzed—a JumpStart tax increase and a local capital gains tax, which could form the basis for future legislation and reduce the time it takes to pass either option.

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In the council meeting Thursday, Nelson and Pedersen returned repeatedly to two ideas: First, they argued, the city should simply reduce the amount it spends on programs that, as Nelson put it, “do not meet measurable outcomes, are duplicative… [or] are no longer aligned with the city’s residents’ current priorities.”

“I am simply suggesting that spending within our means is not austerity. It’s our responsibility,” Nelson said.

Second, the pair argued, the city should get rid of all spending restrictions on the JumpStart tax, which provides a dedicated source of funding for housing and programs that benefit people and businesses disproportionately impacted by the presence in Seattle of large tech companies, like Amazon, and their wealthy employees. “I think the next city council could consider, once again, liberating those payroll tax revenues to handle that deficit, rather than locking up those dollars permanently for new programs [while] piling on another round of new taxes,” Pedersen said.

Councilmember Lisa Herbold—who, like Pedersen, is leaving the council next year—took issue with Nelson and Pedersen’s argument that budget cuts would not negatively impact the city. “The definition of austerity is a situation in which people’s living standards are reduced because of economic conditions,” Herbold said. “‘Just simply living within your means’ sounds nice, and it’s a great soundbite. I’m sure it’ll get picked up today. It sounds great. It’s just not accurate.”

The other taxes on the list include a tax on vacant residential or commercial units, which would have to navigate state law requiring uniform property taxes; a higher real-estate excise tax on the sale of properties above a certain value; a local graduated estate tax, with an exemption for the first $250,000; a local inheritance tax, paid by the beneficiaries of large bequests, which would be the first of its kind in the country; a congestion fee, or toll, on people who drive into highly congested parts of the city; and a flat income tax with rebates for low-income people.

All six of these options would require additional study, authorization from the state legislature, or a public vote, making them less viable solutions to the city’s near-term revenue shortfaull.

Development, Economy, Maybe Metropolis, neighborhoods

The CBGB Theory: Weirdos Not Bros Will Revive Downtown

By Josh Feit

After insisting for months that getting big employers to summon their workforces back to the office was the key to a revitalized downtown, Mayor Bruce Harrell rolled out his updated “Downtown Activation Plan” this week without mentioning that increasingly remote strategy. When Amazon announced earlier this year that, starting in May, employees must come in three days a week, the company’s own employees immediately rebelled.

Today, employees are spending about a quarter of their time working from home, according to a recent Stanford University/Census Bureau study. And just last week, noting that “offices are still at half their pre-pandemic capacity,” the New York Times ran with this enervating headline (for those holding out hope for a corporate office rebound): “Return to Office Enters the Desperation Phase.”

In Seattle, telecommuting was already rising sharply prior to COVID, tripling to more than 16,000 downtown workers between 2010 and 2019, according to Commute Seattle. And let’s be honest, a 3-days-in-2-days-out model already represents the startling acknowledgment that the future of downtowns looks different than the traditional model. More important, a mandate that grates against a major social shift hardly seems like the makings of a long-term or sustainable solution.

And so, credit where credit is due to Harrell’s office for finally chilling out on the Amazon panacea and rolling out some longstanding urbanist wish-list items, including a few legislative proposals. Erica posted an in-depth report on Wednesday, and along with Harrell’s (and soon-to-be deputy mayor Tim Burgess’) predictable, go-to policing solutions, the plan does mine some of the real Janette Sadik-Khan stuff that Seattle urbanists have been talking about for more than a decade.

The grab bag  includes supporting a broader range of building and street uses—waiving fees to bring more food trucks downtown, for example, and allowing both ground-floor housing and retail on the upper floors of buildings downtown. Likewise, it includes recommendation for a pedestrian-only pilot by prohibiting cars on Pike between 1st and 2nd—a tiny bit of car-free real estate, but I’ll take it. And Harrell’s plan even gives a nod to lidding I-5, a near-decade-old, $2.3-to-$2.5 billion planning nerd agenda item. Most prominently, there’s also legislation in the mix that supports increasing downtown housing stock through targeted up-zones on Union and Pike Streets (with incentives for affordable housing) and also code changes that help turn office space into residential space.

As a neighborhood’s stock drops, it becomes more open to free-rein experimentation, not to mention more open to a diverse economic base of commercial renters.

It’s a nice roundup of ideas, but it misses the mark by emphasizing new, downtown residential housing stock; downtown is already dense and tall. We need to get serious about putting density elsewhere in Seattle, rather focusing on downtown . The first step to reviving downtown isn’t new housing, it starts with embracing the grim commercial real estate market, where vacancies recently increased from 22 percent to 24 percent.

How does embracing vacancies help revitalize downtown? Like this: As commercial vacancies rise—new demand for Seattle office space fell 30% from January 2022 —rents drop. And as rents drop, the weirdos, rather than the big employers, move in. And by weirdos, I mean: creative-class, art-centric, small-scale retail. In short: The rebirth of downtown will be sparked not by Amazon, but by high vacancy rates, leading to low rents, leading to an influx of vibrant, small businesses, leading to new housing demand.

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Call it the CBGB theory of city planning. During the sluggish mid-to-late 1970s, New York City’s famously abandoned and spent Lower East Side neighborhood, where CBGB set up shop on Bowery, attracted waves of bohemians who turned the neighborhood into the epicenter of an urban shock wave that would change cities into magnetic destinations for brains, youth, talent, and commerce.

Making analogies to New York City—in the 1970s, for that matter!—certainly seems like a stretch for Seattle. Seattle’s hot tech economy and hot real estate market don’t conjure the “Ford to City: Drop Dead” days of NYC bankruptcy. Nor does Seattle, population 779,000, parallel the creative serendipity that flows through a city of more than 8 million people like New York. But this basic truism makes sense at any level: As a neighborhood’s stock drops, it becomes more open to free-rein experimentation (and yes, graffiti!), not to mention more open to a diverse economic base of commercial renters.

I’m going to put my hope in the new, small businesses that have recently and eagerly started popping up downtown. 

The limited data available from real estate analysts such as CoStar suggests that demand for leases on smaller spaces (0-5,000 square feet) has decreased more than 50 percent year over year—suggesting lower rents could come, drawing small businesses  downtown.

Consider the arc of this anecdotal observation about the downtown retail renters’ market from the folks at Seattle Restored, a City of Seattle program that pairs downtown landlords with small pop-up style businesses for three-to-six month rental stints, providing grants to help with rent.

A lot of property management companies began reaching back out, perhaps realizing renters weren’t willing to pay the high prices, they were now looking for smaller renters.

When I first contacted them in April for any insights about downtown’s small space retail market, they believed landlords were willing to hold out for high rental prices. They didn’t have any hard data, but said they noticed larger real estate/property management companies were rescinding  initial offers to work with the program, likely holding out hope to rent at full market value.

However, recently they noticed a change. This week they gave me an update, saying it looked more like a renters’ market these days: About a month after we first spoke, they told me, a lot of property management companies began reaching back out. Perhaps realizing commercial tenants weren’t willing to pay the high prices, they were now looking for smaller renters. The program’s success so far backs up this theory: With 30 spaces now filled, the program is well on its way to hit its goal of 45 small businesses set up by the end of the year.

With that in mind, I’m going to put my hope in the new, small businesses that have recently and eagerly started popping up in PubliCola’s neighborhood (Pioneer Square), such as The Monkey Bridge II,  OHSUN Banchan Deli & Café, and Café Lune—none of these are  a subsidized Seattle Restored business, by the way. In short, I’d rather bank on them than on Harrell’s plan for new high-rises on 3rd (conveniently ousting McDonald’s, I imagine)—or phantom Amazon employees, for that matter.

The city should focus less on policies of willful denial—landowners imagining high rents and Amazon execs mandating against reality—and focus more on attracting eager small businesses. The city can do this by passing zoning regulations that favor or even mandate smaller square footage spaces. Let the weirdos, not the bros, take the lead in reviving downtown.

Josh@Publicola.com

Drugs, Economy, homelessness, land use, Mayor Harrell

“Downtown Is You”: Harrell Unveils New Downtown Plan Against Backdrop of Anti-Sweeps Protest

Mayor Bruce Harrell speaks to a crowd of supporters and press at Westlake Park

By Erica C. Barnett

Mayor Bruce Harrell gathered supporters in Westlake Plaza Wednesday morning to announce his latest downtown activation plan, officially titled “Downtown Is You.” But the press event was initially sidelined by a group of anti-sweeps protesters holding signs and chanting, “stop the sweeps” and other slogans from a few feet away. After halting his prepared remarks, Harrell hopped down from the stage and attempted to get the protesters to be quiet, but gave up and returned to the stage after several responded that they didn’t trust his offer to talk to them in a different venue.

“Westlake Center is a center for civic engagement,” he told the audience. “Unfortunately, that’s not civic engagement—that’s just yelling.”

“These [unsheltered] folks you see down here, they’re not strangers to me. I grew up on these streets,” Harrell continued. Gesturing toward the group of young activists, he added: “How dare anyone say I’m going to sweep anybody. I don’t see anyone over there I grew up with.”

Under Harrell, the city has dramatically increased the speed and frequency of encampment removals.

The seven-point downtown plan Harrell announced Wednesday does not directly address encampments. However, it does envision a downtown occupied by shoppers, sports fans, and residents of new high-rise apartment towers along a section of Third Avenue between Stewart and Union Streets, where drug users and unsheltered people frequently congregate. The proposed upzone includes the block that includes a McDonald’s and a check cashing outlet as well as the block anchored by Ross Dress for Less.

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At a press briefing on Tuesday, mayoral advisor (and soon-to-be deputy mayor) Tim Burgess said “several” developments in the area were “ready to go” once a proposed upzone goes through. The proposal would increase the maximum height for new buildings from 170 feet to 440 (460 if new developments include child care or education facilities) on about five blocks that are adjacent to a area where 450-foot-high buildings are already allowed. The city’s land use database does not include any active permits for these blocks.

On Tuesday, Burgess said the proposed rezone reflects “a recognition that we need to make some dramatic changes in order to shift what’s been several decades now of problematic street uses and disorder.”

Police almost outnumbered protesters during a demonstration at Mayor Bruce Harrell’s announcement of his downtown activation strategy.

Harrell’s plan also includes legislation to allow a broader mix of uses on the ground floor of buildings (apartments or conference spaces instead of retail, for example) and throughout buildings themselves, in the form of “vertical residential neighborhoods within buildings” that allow residents to access everything they need, from child care to retail stores to pickleball courts, inside their buildings.

The idea is a nod to the fact that—Harrell’s back-to-work order and admonishments notwithstanding—many people have continued to work at least partly from home, leaving significant vacancies in downtown office buildings. “I don’t think this is a philosophical shift away from retail” serving downtown office workers, McIntyre said Tuesday. “It’s embracing some flexibility and some new ideas and wanting to encourage a different mix on the ground floor area as the as the city continues to change.”

Another piece of legislation would make a half-block of Pike Street between First and Second Avenues pedestrian-only, connecting Pike Place Market Market to—well, one half-block of downtown directly adjacent to, but not part of, the market. (Asked whether the mayor would consider prohibiting car traffic in Pike Place Market—where pedestrians compete for space on the historic brick streets with exhaust-spewing cars—Office of Economic Development director Markham McIntyre said the city was still “talking to Pike Place Market … to figure out what what that might look like,” but had no immediate plans to get rid of cars in the Market, a change pedestrian advocates have been demanding for decades.

 

Beyond those concrete legislative proposals, the plan consists mostly of expanded pilot projects (doubling the number of businesses participating in Seattle Restored, a pop-up project that fills empty storefronts), initiatives that are already underway (reopening City Hall Park, “more murals” downtown), and ideas that are still very much in the whiteboard stages. It also incorporates many aspirational ideas that would require significant additional funding, such as completing the downtown streetcar, putting a lid over I-5, and creating a new “arts district” from South Lake Union to Pioneer Square.

Mayor Bruce Harrell speaks to a group of Stop the Sweeps protesters at Westlake Park.
Mayor Bruce Harrell briefly spoke to protesters before returning to his press event.

And, of course, it assumes a heavier police presence downtown—a mostly unspoken, but bedrock, element of the proposal. “Make Downtown Safe and Welcoming” is actually number one on the plan’s list of seven priorities, starting with arrests of people “distributing and selling illegal drugs” (and, presumably, using them—Harrell mentioned that a bill criminalizing drug possession and public use will likely pass in July). The safety plan also includes a number of initiatives to address addiction that Harrell announced in April, along with a plan to help private property owners remove graffiti—a particular burr under Harrell’s saddle.

Earlier this month, a federal judge issued an injunction barring the police from arresting people for tagging or graffiti, finding that Seattle’s broadly worded law “likely…violates the First and Fourteenth Amendments by being both vague and overbroad.” On Wednesday, I asked Harrell—who had just expounded on the difference, as he sees it, between “art” and “graffiti” (“One word: It’s unwanted”)—what he would do if the judge overturned the law.

“We have to have the ability to arrest people for unwanted graffiti, so if there’s precise language in the law that is unconstitutional, that is vague, that’s ambiguous, we have to fix it,” Harrell said. “If we lose the lawsuit, we go back to the drawing board and figure out what the deficiencies are in the law, and we fix it or remedy it.”

“This graffiti stuff just drives me nuts,” Harrell added.

Addiction, Drugs, Economy, Mayor Harrell

Harrell Proposes Investing in Evidence-Based Approaches to Addiction as Part of Downtown Revitalization Plan

 

Mayor Bruce Harrell and City Councilmember Sara Nelson

By Erica C. Barnett

Mayor Bruce Harrell issued an executive order Monday expanding Health One to include a new overdose response unit aimed at getting people into treatment, directing the Seattle Police Department to “prioritize enforcing [illegal drug] sales and distribution related crimes to the fullest extent permissible,” and committing the city to “site, explore funding for, and work with the University of Washington Addictions, Drug and Alcohol Institute (UW ADAI), and County partners to establish a post overdose diversion facility where EMS can bring people after non-fatal overdoses to recover, get stabilized on medications, and access resources.”

Currently, when medics revive someone who has overdosed, the person can either agree to go to the hospital, where they’ll get information about treatment, or decline; a post-overdose facility would provide another route for people who would ordinarily decline additional care.

“What’s going to happen now is that [in addition to Fire Department medics], Health One is also going to respond” to overdoses, Seattle Fire Chief Harold Scoggins said at an event announcing the order in Pioneer Square Monday afternoon. “Health One comes with case managers and firefighters who are trained [to] talk to folks and really explain the resources that are available to them. After the fire units leave, the police units leave, Health One will still be on the scene.”

The order also endorses an evidence-based harm reduction strategy called contingency management, which involves providing incentives, such as low-dollar gift certificates, to drug or alcohol users who enroll in treatment and stay clean.

Harrell didn’t have many details about the plan to open a post-overdose response site, such as how it would be funded, who would staff it, or—importantly—why people who overdosed and refused to go to Harborview would be willing to go to a different facility. “Full disclosure: How it’s staffed, how we fund it—that’s the work we’re trying to do now, because in looking at the numbers of fatalities and overdoses, we realize that’s sort of a gap in our treatment scenario,” Harrell said.

The order also endorses an evidence-based harm reduction strategy called contingency management, which involves providing incentives, such as low-dollar gift certificates, to drug or alcohol users who enroll in treatment and stay clean. Contingency management has been especially effective at reducing stimulant use, for which—unlike opiates—there is no drug-based treatment. “We will do what makes sense to get people in treatment,” Harrell said.

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City Councilmember Sara Nelson, who is in recovery and has previously expressed opposition to harm reduction approaches like medication-assisted treatment, called  contingency management a “proven method…  that rewards people who want to stay sober, and get on the path to long term recovery, no matter what their addiction.” After the press conference, she told PubliCola the program already has a funding source: Seattle’s share of a statewide fund that resulted from a settlement in the state’s lawsuit against the three largest opiate distributors.

The executive order also commits the city to “convene a workgroup to map out the various local, county and state programs and services available to treat and respond to the opioid and synthetic drug crisis.”

“This time-limited workgroup will be tasked with identifying gaps in our current systems and making recommendations on how to better coordinate a treatment-first approach to reducing substance abuse disorders and overdose rates. The workgroup will also assess ongoing investments and programs to determine what is working well and how existing investments could be expanded to serve more people.”

As a separate part of the downtown plan, the head of the city’s Office of Economic Development, Markham McIntyre, announced that the city will reopen City Hall Park next to the downtown King County Courthouse, which has been closed and fenced off since 2021 (more “jumbo chess boards”); open up streets to pedestrians  more often for special events, including, “perhaps, on-street pickleball tournaments”; and ask the Washington Liquor and Cannabis Board for “sip and stroll” liquor permits that would allow people to walk around with drinks during events like First Thursday art walks.

Addiction, City Council, Economy, homelessness, human services, Mayor Harrell, Police, Taxes

Council Budget Eliminates 80 Vacant Police Positions, Preserves Human Service Pay, Moves Parking Officers Back to SPD
City Council budget chair Teresa Mosqueda

By Erica C. Barnett

The Seattle City Council’s budget committee, which includes all nine council members, moved forward on a 2023-2024 budget yesterday that will move the city’s parking enforcement division back to the police department, preserve inflationary wage increases for human service workers, and increase the city’s funding for the King County Regional Homelessness Authority—all while closing a late-breaking budget hole of almost $80 million over the next two years.

Every fall, the mayor proposes a budget and the council “rebalances” it, adding spending for their own priorities and removing items to keep the budget balanced. In November, after many council members had already proposed substantial changes to Mayor Bruces Harrell’s initial budget proposal, the city received news that tax revenues would be even lower than previously anticipated. The biggest unanticipated shortfall came from a decline in real-estate taxes, which pay for long-term capital projects, but other revenues, including parking taxes and money from the sweetened beverage tax, also declined.

Last week, council budget chair Teresa Mosqueda proposed a balancing package that saved money by declining to fund most of the new programs and program expansions Harrell proposed in his budget, while making several substantive policy changes. Among the most controversial: A proposal to eliminate 80 vacant positions in the police department, and a related plan to to keep the city’s parking enforcement officers at the Seattle Department of Transportation (SDOT), rather than moving them back to SPD, while the city decides on a permanent home for the unit.

“Our mayor’s budget did not delete these 80 [vacant police] positions, and if we trust in what the mayor asks for regarding public safety and the budgeting knowledge and skills and best practices of the city budget office, I don’t think we should do anything different here.”—Councilmember Alex Pedersen

The budget the committee adopted Monday night, nearly 12 hours into a meeting that began at 9:30 that morning, will eliminate the 80 vacant positions, while preserving another 160 vacant positions in future years. Vacant positions continue to be funded year after year unless the mayor or council takes action to defund them temporarily and use the money for other purposes, as Harrell’s budget does this year. Both the proposed budget and the one adopted by the committee on Monday use money  that would have gone to the 80 vacant positions to augment the city’s general fund, while using the savings from another 120 positions to pay for new spending within the police department. This week, the council got word that SPD had identified another 40 vacant positions, for a total of 240.

Council member Alex Pedersen opposed eliminating the 80 unfilled police positions, arguing that it would be wrong for the council to go against the “wisdom” of the City Budget Office, the mayor, and police chief Adrian Diaz, who want to keep as many positions vacant but funded as possible.

“Our mayor’s budget … did not delete these 80 positions, and if we trust in what the mayor asks for regarding public safety and the budgeting knowledge and skills and best practices of the city budget office, I don’t think we should do anything different here by abrogating or deleting these 80 positions,” Pedersen said.

Council member Sara Nelson added that eliminating vacant positions as a recurring budget line item could discourage people from applying for jobs at SPD and send a message to existing officers that the city did not support police hiring.

In response, council public safety chair Lisa Herbold pointed out that the budget fully funds the mayor and SPD’s hiring plan, which would increase the department by a net total of 30 officers in the next two years. (This hiring plan assumes a complete reversal, and then some, of current SPD hiring trends). It also keeps the remaining 160 vacant positions on the books, where they will be funded again automatically in 2025. For the city to need the 80 positions the council eliminated Monday, it would have to hire at least 190 net new officers, not counting new recruits who replace officers who leave the department. If that very unlikely scenario came to pass, the council could add funding for more officers—as it has many times in the past.

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“It’s really disappointing that … some people seem unwilling to say that the hiring budget is fully funded for the next biennium for the council to act on,” Herbold said. “That would send a positive factual message, rather than … distort what an abrogation of positions would do for the budget.”

Nelson and Pedersen also cast the only votes against a Herbold-sponsored proviso, or spending restriction, requiring the police department to get council approval if they want to use their staffing budget for anything other than salaries and benefits, arguing it was important to give SPD special flexibility to spend their budget how they want to.

“I believe we should stop micromanaging the use of salary savings and exercise some humility going forward because we simply don’t know what needs will need to be met,” Nelson said. “[Extra] overtime, for example, if there’s an earthquake or a mass shooting or something.”

In a last-minute compromise with Harrell’s office, the council agreed to move parking enforcement from SDOT to SPD, as PubliCola reported Monday. The compromise amendment uses administrative savings from the move (almost $9 million a year) to pay for several council spending priorities, including $1 million in one-time funds to support the Public Defender Association’s LEAD and Co-LEAD programs, which Harrell’s budget partially defunded; $1 million to “activate” City Hall Park in Pioneer Square, which has been fenced off since the summer of 2021; and $1 million for RV parking and storage “associated with non-congregate shelter,” among other new spending.

In a separate amendment, the council provided an additional $2 million a year for LEAD and Co-LEAD, which the PDA says still leaves them $5.3 million a year short of what it needs to fully fund both programs. The two programs provide case management and (in the case of Co-LEAD) hotel-based shelter for people involved in the criminal legal system, including many with behavioral health conditions that make it harder to find housing.

Morales had more success with another amendment that would place a budget proviso, or restriction, on $1 million in 2023 spending from the city’s transportation levy, requiring SDOT to spend it replacing plastic bollards that do not actually “protect” bike lanes with concrete barriers that do.

Here are some more highlights from Monday’s meeting, which was the last chance for council members to make substantive changes to the budget; for budget changes the council agreed on prior to Monday’s meeting, check out our coverage of those changes from last week.

• The council turned down proposals to place extra scrutiny on two programs that the council’s more conservative faction, led by Pedersen and Nelson, generally oppose. For example, they voted to remove $1.2 million in funding (all numbers are two-year figures) that Nelson wanted to spend on two full-time city staffers who would evaluate the JumpStart tax, which was just implemented last year.

The council also rejected two proposals by Nelson to apply extra scrutiny to LEAD and Co-LEAD, which take a harm reduction approach to addiction and low-level criminal activity rather than the abstinence-only approach Nelson favors (more on that in a moment). Specifically, Nelson wanted detailed information about the PDA’s subcontracts with REACH, the homeless outreach provider, and the basic details of both programs.

“What services are provided to the clients of LEAD?” Nelson asked Monday. “Which contractors do what for which program?”  because they do receive so much funding?” Additionally, Nelson proposed an amendment that would require quarterly reports on LEAD and Co-LEAD clients’ shelter and housing “acceptance” rates. Continue reading “Council Budget Eliminates 80 Vacant Police Positions, Preserves Human Service Pay, Moves Parking Officers Back to SPD” →

City Council, Economy, Mayor Harrell, Taxes

Dire Revenue Forecast Spells Trouble for Capital Projects, Delays Council Budget Action
Graphs showing stark decline in the US housing market in 2023
The problem: A spike in interest rates has made mortgages unaffordable to many, reducing revenue from real estate sales that the city relies on to balance its budget.

By Erica C. Barnett

PubliCola management has been out of the office for the past couple of weeks (vacationing in a graffiti-covered post-apocalyptic European wasteland), which is why we haven’t been posting our usual detailed city budget updates. Luckily for us, city council budget chair Teresa Mosqueda decided to take an extra week before releasing her final budget balancing package, after the city’s Office of Economic and Revenue Forecast released a new revenue forecast last week that sent budget writers scrambling.

That new forecast predicts a sharp decline in revenues from a number of sources, including the sweetened beverage tax (SBT), the real estate excise tax (REET), and the retail, business, and sales taxes that make up the city’s general fund, which pays for everything from police salaries to homeless outreach workers.

For 2023, the new forecast predicts an additional general-fund shortfall of about $4.5 million. In addition, the new projections predict an additional sweetened-beverage tax shortfall of $1.6 million and an additional REET shortfall of $26.7 million. Over three years, those projections are $9.4 million, $4.5 million, and $64 million, respectively. Revenues from REET and the sugary beverage tax, unlike general-fund revenues, can only be spent on certain purposes, which limits the city’s ability to pull funding from either source to fill general-fund shortfalls (although elected officials have frequently tried); in addition, REET is largely tied up in mandatory debt payments on major bond-financed capital projects, making much of this funding source off-limits to annual budget writers.

Usually, when people refer to the city budget, they’re talking about the general fund, which represents the part of the city’s overall budget that the city council and mayor have the greatest ability to tweak. So let’s start there. On its own, the $4.5 million general-fund shortfall is not a hugely significant number in the context of a $1.6 billion budget. However, in late October, council members proposed budget amendments that would add $80 million in general-fund spending, which would have to be offset by still-unidentified cuts to Harrell’s budget proposal.

To vastly oversimplify, last week’s revenue forecast downgrade means that if the council wanted to fund all of their own priorities, they would need to reduce Harrell’s budget by $90 million. Obviously, many of these budget amendments won’t make it through—looking at you, new Seattle Fire Department program to promote “floatplane awareness”—but any additional spending requires an equivalent cut to Harrell’s budget plan.

And some of these amendments will be sacrosanct. For example, the council has shown virtually no enthusiasm for Harrell’s plan to cap annual increases on human service provider wages at a sub-inflationary 4 percent, effectively cutting these underpaid workers’ wages. (The exception is Councilmember Sara Nelson, a longtime business owner who wondered aloud why a subinflationary wage increase didn’t constitute a “raise.”) Increasing provider wages to the level currently required by law would cost about $7.1 million in 2023.

Other amendments would increase the city’s contribution to the King County Regional Homelessness Authority by $9.4 million annually to offset the loss of temporary federal funding that enabled shelters to reduce crowding during the (still-raging) pandemic; establish new tiny house villages; preserve the LEAD and Co-LEAD programs; and pay for new and existing crisis response programs. Proposals to expand human services will be harder to eliminate than, say, an amendment from Nelson that would spend $1 million on an unspecified new addiction treatment center—something King County, which has jurisdiction over public health and addiction programs, would ordinarily fund.

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Achieving a new budget balance will, as always, require some combination of spending restraint (passing only some proposed amendments) and cuts (bringing Harrell’s proposal, which includes tens of millions in new spending on priorities like removing encampments and graffiti abatement, down to size). Council members had already set their sights on Harrell’s proposal to dramatically expand the encampment-sweeping Unified Care Team and his plan to spend $1 million on a gunshot surveillance system like Shotspotter, which civil liberties advocates, including the ACLU, oppose.

Another option will be for council members to overturn a law they passed last year restricting the use of JumpStart payroll tax revenues, which are supposed to pay for affordable housing, equitable development, and Green New Deal programs, to backfill the city’s general fund. The new law says the city can only use JumpStart revenue for non-JumpStart purposes if the general fund falls below $1.5 billion. Harrell has proposed changing the law to pin the general fund baseline to inflation, allowing the city to use more of the earmarked money for non-JumpStart purposes.

The general fund is not the only budget area where the council will have to make some hard choices, nor is it the largest. Projected revenues from real estate taxes, which the city thought would continue to increase this year, have taken a nosedive thanks to rising mortgage rates and the resulting slowdown in housing purchases.

Because a large chunk of REET revenues pay for debt service, a fixed cost, or multi-year capital improvement projects such as road paving and maintenance, the city can only make limited changes to REET spending. Generally, that means cutting new or shorter-term capital projects. Some of these are improvements that mostly benefit city employees rehabbing the elevators at the Seattle Municipal Tower, for example—but others are the kind of visible, council district-level projects that voters tend to notice.

For example, Harrell’s proposed budget includes $2.5 million in new REET spending to promote “safety and accessibility” at City Hall Park; $10 million for a new Tribal Interpretive Center on the downtown waterfront; and $1 million to rehab at least one park restroom. Eliminating or delaying these programs, or any REET-funded capital project, will produce instant blowback from constituents, who will be voting next year in all seven district-based council races.

A spokesman for Harrell’s office said Monday that the mayor “recognizes that this is a challenging revenue forecast. … The mayor’s proposed budget makes critical investments in key priority areas including public safety, housing and homelessness, and the essential city services residents expect. Based on our collaboration throughout this process, we believe the Council will ensure these priorities remain adequately funded in the final budget.”

PubliCola has calls out to several council members, including Mosqueda, and will be posting additional budget updates later this week.